With Greece’s debt rated ‘junk’ what effect will it have on the rest of Europe and the UK?
Stephine Flanders writes that
“Like other governments that are borrowing a lot, ours would be vulnerable if international investors decide, overnight, that sovereign debt isn’t a safe bet after all. We recently won the chance to host the Olympics. But there the similarity ends…
That may change. We may, after all, have some serious political uncertainty coming down the track. But market movements today are a good reflection of the distance between London and Athens.
Investors may worry a lot more about Britain’s public finances than they did a few years ago. But they worry half as much about it as they worry about Greece.”
Why does this matter? Well think back to the banking crisis two years agoand the knock on effect that one shake can have on a nation. Imagine rather than banks whole nations collapsing. Economist Jonathan Loynes, of Capital Economics, said that Greece could be a “sovereign equivalent” of Lehman Brothers; the bank which started the collapse.
Will we have to bail out a whole country? Several countries? Time will tell.
Britain’s next Chancellor will oversee the start of most sustained squeeze on public spending in at least 60 years.
Without huge tax rises, government departments will have to cut around £37bn from their budgets by 2013-14. Yet all three main parties refuse to explain how at least £30bn of these savings will be found.
To illustrate the scale of the challenge, the Financial Times has simulated the next three year spending review, highlighting the type of decisions the next chancellor will face if taxation stays on the same path.
You need to register to play (but it’s free).
It’s a good introduction to the tough decisions that the next chancellor will have to make.
In this fun video, chocolate enthusiast James Ward describes how he visited more than 140 locations in London checking the price and sale condition of Cadbury’s Twirl chocolate bars. One of his slides includes the economist Adam Smith, and Ward sees his Twirl project as providing consumers with the information they need for the market to function smoothly. With his Google Map, you can save yourself as much as 10p by locating the cheapest Twirl on your street.
Ward even generated some statistics from his data, although he admits his correlation of shop name and Twirl availability is “worthless”. No one can accuse him of taking himself too seriously.
A great article in the Wall Street Journal shows the link between economics and the recent earthquakes.
“It’s not by chance that Chileans were living in houses of brick—and Haitians in houses of straw—when the wolf arrived to try to blow them down. In 1973, the year the proto-Chavista government of Salvador Allende was overthrown by Gen. Augusto Pinochet, Chile was an economic shambles. Inflation topped out at an annual rate of 1000%, foreign-currency reserves were totally depleted, and per capita GDP was roughly that of Peru and well below Argentina’s…
Milton Friedman has been dead for more than three years. But his spirit was surely hovering protectively over Chile in the early morning hours of Saturday. Thanks largely to him, the country has endured a tragedy that elsewhere would have been an apocalypse.”
“Fear the Boom and Bust” a Hayek vs. Keynes Rap Battle
Econstories.tv is a place to learn about the economic way of thinking through the eyes of creative director John Papola and creative economist Russ Roberts.
In Fear the Boom and Bust, John Maynard Keynes and F. A. Hayek, two of the great economists of the 20th century, come back to life to attend an economics conference on the economic crisis.
Before the conference begins, and at the insistence of Lord Keynes, they go out for a night on the town and sing about why there’s a “boom and bust” cycle in modern economies (as you do) and good reason to fear it.
Get the full lyrics, story and free download of the song in high quality MP3 and AAC files at www.econstories.tv
